Kyle M. Wool

CEO, Dominari Securities

Over the last 18 months, AI and AI-related stocks have been all the rage on Wall Street. Leading chip maker Nvidia Corporation, for example, has become one of the world’s largest companies, progressing in just a few years from being the darling of the gaming industry to the chip of choice for crypto mining. The speed and power of Nvidia’s chips also enable their use in the exploding business of AI. Nvidia(NVDA) stock is up approximately 2,700% in the last five years ¹ and has increased around 240% in the last year. Similarly, advanced server specialist Super Micro Computer, Inc.(SMCI), which provides AI-enabling hardware for its data centers, is up approximately 2,160% in the last five years and over 86% in the last twelve months. Companies like Nvidia and Super Micro have been massive beneficiaries of the exuberance in AI microchip investors.

So where do investors look to invest in AI outside of NVDA and SMCI?

We believe NVDA and SMCI are still great companies and good investments and mega tech companies like Google, Microsoft, Apple, Amazon and similar companies are certainly worthy investments to consider as we expect they will all play a considerable role in the future of AI.

In this newsletter, we explore other pillars of the AI ecosystem and identify emerging prospects that we believe are worthy of consideration. Within the sector, we break the opportunities down by the following categories: chips, data centers and clean energy. But first, we need a basic understanding of the major aspects of AI.

First, the AI chip race, the ever-increasing demand, the need for improvement and who is reimagining them.

Currently, the chips that are powering fast-growing AI companies, such as Open AI, Anthropic, Googles’ Gemini and Elon Musk’s xAI, have largely been repurposed Nvidia and SMCI chips. Both Nvidia and SMCI are rapidly developing faster and more powerful chips, specifically designed for use in AI, consistent with “Moore’s Law,” an axiom coined in the mid-1960’s by Gordon Moore, co-founder of Intel. Based on Moore’s Law, a guiding principle of the semiconductor industry for close to 60 years ² , the computing power of a microchip should double every two years due to miniaturization of the microchip and the increasing number of transistors than can be added and stacked to generate more computing power. However, a microchip can only be decreased in size to a certain point, due to physical constraints at the atomic level. There is a common belief in the industry that Moore’s Law is giving way to a complete reimagination of the microchip.

Jensen Huang, CEO of Nvidia, envisions redesigning microchip structure entirely and possibly incorporating the use of nanotechnology on even the subatomic level. There are several new startups that have become unicorns in rethinking the fundamental design and limits of the AI microchip. One of these unicorns is Cerebras Systems. Cerebras is reimagining the microchip in a different direction, having instead developed a large integrated wafer, the size of a frisbee, with the transistors and memory fully integrated into one wafer. Several reports state that its integrated wafer is 20 times faster than Nvidia’s top performing microchip. Due to its vast power and speed, we believe Cerebras’s wafer has immense potential for use in large data centers, government super computers and university settings. When Cerebras CEO Andy Feldman was asked what percentage of Nvidia’s market share his company is going after, he responded, “All of it.” With Citibank and Barclays as its lead underwriters, Cerebras has filed a registration statement for an initial public offering and intends to list its common stock on the Nasdaq Global Market. The IPO and stock listing is valued at $7 to $8 billion and is expected this year ³ .

Groq is another unicorn focused on reimagining the approach to AI ⁴ . Within the AI space, approximately 75% of computing power and investment dollars have been centered on data upload to generative AI, which basically consists of “teaching” the AI what it needs to know. Groq’s founders believe that, by 2027, the importance of data upload will give way to how the AI devices interact with users and with each other, such that 75% of the computing power and investment dollars will shift focus to the latter. So Groq is taking a different approach and has developed a chip and a language module focusing on the interface between users and AI, whether it is a virtual personal assistant or, as Elon Musk envisions, your personal robot, a “C-3PO” in every house. Consistent with Groq’s approach, Musk stated at Tesla’s annual shareholder meeting that he envisions a scenario where its Optimus robot (his “C-3PO”) could become the biggest part of Tesla’s business, propelling it to a $20 trillion market cap from Optimus alone ⁵ . No doubt the AI user interface will be essential to accelerating adoption of virtual personal assistants or humanoid robots like Optimus.

Second, the technology needed to run massive AI data centers.

Data centers are all the rage today. Big tech giants like Amazon, Google, Apple and Microsoft are building out massive data centers globally. These data centers are enormous in terms of square footage, with some as large as three combined football fields. The companies that are positioned to benefit the most from the data center gold rush are the manufacturers of “the picks and shovels” within the data center construction space, just like in the Gold Rush of 1849. These include technology relating to power, cooling, memory, monitoring, repair, circuit construction and the like. Three companies that we believe have already benefitted and will continue to benefit from this massive need are Vertiv Holdings (VRT), Celestica Inc. (CLS) and Credo Technology Group (CRDO).

Vertiv (VRT) is a leader in the electrification of data center space. Through its subsidiaries, VRT provides DC power systems, heat rejection, power transfer systems, monitoring equipment, power control and holistic data system cooling solutions. Over the last five years, VRT stock has been up over 990% and 200% in the last year.

Celestica (CLS) designs and manufactures electronic components with the goal of optimizing the supply chain. It designs and manufactures electronic components for prototyping, printed circuit assembly, full system assembly, power converters, memory packages and repair services. CLS stock has been up about 900% over the last five years and 174% in the last year.

Credo (CRDO) provides connectivity solutions. Its solutions include IP and chiplets, line cards, optical DSP’s and active electrical cables. CRDO stock has been up over 290% over the last five years and up 175% in the last year.

We are in the early innings of the data center gold rush, and these companies have a massive number of picks and shovels to sell to an ever-expanding data center market.

Third, the immense demand for clean energy to power AI technologies.

Over the last decade, giant tech companies have all stated their commitment to lowering their carbon footprint and cutting CO2 emissions. These are noble ambitions, but currently, alternative power sources such as solar, wind and hydro power produce nowhere near the level of power needed to operate massive data centers. The obvious alternative in our opinion is nuclear power. In just the last few weeks, three tech giants have made major announcements regarding their plans for using nuclear power. For example, Microsoft recently signed a 20-year power purchase agreement with Constellation Energy Corporation that will pave the way for the launch of a clean energy center to power Microsoft data centers and restart Three Mile Island Unit 1 ⁶ . Under the agreement, Microsoft will purchase all the energy from the renewed plant as part of its goal to use carbon-free energy. Similarly, Google announced a new nuclear clean energy agreement with Kairos Power for the development of Small Modular Nuclear reactors (SMR’s) on site, to directly power the data center. Amazon also recently announced investments and partnership with U.S. energy companies, such as Energy Northwest, a public power agency leading the development of next-generation nuclear technologies ⁷ , and Dominion Energy, a regulated electricity service provider, the largest producer of carbon-free electricity in New England and one of the nation’s leading developers and operators of regulated offshore wind and solar power. Amazon is also purchasing a stake in X-Energy to pursue SMR’s, as are Citadel LLC CEO Ken Griffin and the University of Michigan.

How do our investors take advantage of this trend in nuclear technology?

Two public companies that own and operate nuclear reactors are Constellation Energy Corporation (CEG) and Vistra Corp. (VST). Constellation is the nation’s largest producer of clean, carbon-free energy and a leading supplier of energy products and services to customers across the continental United States, including three-fourths of the Fortune 100 companies. CEG stock has been up around 530% in the last five years and about 135% in the last year. Vistra is a leading integrated power generation company that generates energy via nuclear power and traditional sources. VST stock is up around 357% in the last five years and over 275% in the last year.

Currently, there are not many ways to invest directly in SMR’s, such as Karios and X-Energy, without the help of a firm like Dominari Securities, as those companies are privately-held. However, there are two SMR manufacturers that are publicly traded. One is Oklo, Inc. (OKLO), whose chairman is OpenAI CEO Sam Altman. On May 10, 2024, Oklo merged with AltC Acquisition Corp., Mr. Altman’s SPAC , and OKLO began trading on the New York Stock Exchange. Since then, OKLO stock has increased about 125%. Another name we find interesting is NuScale Power Corporation (SMR), an industry-leading provider of proprietary and innovative advanced SMR technology. NuScale’s stock is up 85% over the last five years, but more importantly, it is up around 425% just in the last year. We believe that the industry is in the very early stages of a massive build out by both the traditional nuclear operators and the new SMR’s, which are expected to be funded by big tech and backed by the U.S. government. In our estimation, these developments in the nuclear power market mirror

the jump two decades ago by Elon Musk and SpaceX into the space race with private sector sensibilities to revolutionize and

propel a dying space industry to new heights unimaginable.

Investment in AI shows more promise that ever before.

As discussed, we believe several fi elds of the AI development industry present exciting and alternative investment potential, from new and exciting micro chip designs to mega data centers, to nuclear technologies to power them. Twenty years ago, Amazon, Google and others were just brash start-ups. Now, Amazon and Google are two of the largest companies on earth. It would not surprise us in the least if some of the AI unicorns we are looking at today follow in those same footsteps to become the next tech giants.

One of the privately held AI companies we are watching closely is Sam Altman’s OpenAI, in which Microsoft is a substantial investor, with a $157 billion dollar valuation as of its last round. Another is Anthropic, a generative AI company with a $4 billion investment from Amazon and $2 billion investment from Google. Anthropic’s most recent valuation is estimated at $40 billion dollars. Another is Elon Musk’s newly launched xAI, which has already raised $6 billion and has a current estimated valuation of $24 billion. When it comes to AI, we would not bet against the man who created the electric car and the re-usable starship.

We are excited to see which of these companies go public next. We are hopeful that the imminent IPO of Cerebras will be just the beginning of a series of AI and AI-related unicorn IPO’s and M&A activity from the current big tech giants in the AI space.

Kind regards,

Kyle M. Wool

Dominari Securities, Chief Executive Officer

Disclosures: My family owns and I individually own AAPL, CEG, CLS, CRDO, MSFT, NVDA, OKLO, SMCI, SMR, TSLA, VRT and VST in the public market. My family owns and I individually own Cerebras Systems, Groq, SpaceX and xAI in the private market via Dominari Master Series SPV’s Dominari Holdings, the parent company of Dominari Securities, owns Cerebras Systems, Groq, and xAI in the private market via Dominari Master Series SPV’s.

If any accredited investor is interested in participating in a Dominari Master Series SPV’s to purchase pre-IPO Unicorns , please contact info@dominarisecurities.com and a registered representative will follow up with you.

Contact Us
   

725 5th Avenue, 23rd Floor

New York, NY 10022
   

Toll Free: 800-299-7618

Main Office: 212-393-4500

info@dominarisecurities.com

www.dominarisecurities.com